Board of Governors of the Federal Reserve System

Opening Statement
Welcome, everyone who is joining us both in person and online to this open meeting of the Federal Reserve Board. Thank you in advance to the staff for your presentations today and thank you to everyone who worked to bring these proposals together.

In the wake of the global financial crisis, regulators, including the Fed, increased the quantity and quality of loss-absorbing capital required of banks, including through stress testing requirements and an additional surcharge for the largest and most complex banks. This action substantially increased the banking system's resilience. However, it has been almost two decades since the crisis, and over the years we have come to understand that certain elements of the post-crisis regulatory regime may warrant recalibration.

Financial regulators should always strive to improve. It is a healthy practice to reexamine rules over time to ensure they are still effectively and efficiently mitigating the risks they were designed to address. Today we are considering whether to seek comment on three proposals with that intent.

The first proposal would implement the final components of the Basel III agreement for the largest banks; the second would better align capital requirements for traditional lending activities with risk for most other banks; and the third would improve how the capital surcharge for systemic risk is measured. I look forward to the presentations and will now turn to Vice Chair for Supervision Bowman.

Concluding Statement
Financial regulations put into place since the global financial crisis substantially increased the banking system's resilience. However, it is prudent to reexamine our regulatory frameworks at regular intervals and strive to modernize our rules to help maintain international standards in a way that is appropriate for the U.S. banking system. We discussed three such proposals today.

The first proposal would help us fulfill our commitment to the Basel III capital standards by improving the calibration of the framework to better capture credit, market, and operational risks for the largest, most internationally active banks. This proposal would also simplify how banks calculate their compliance with capital requirements—requiring only one, simple calculation, rather than two. And, critically, the proposal would preserve the overall calibration of the core capital requirements for our largest banks. I particularly look forward to hearing from commenters about whether our Basel III proposal successfully achieves the objectives of the international accord while tailoring to the unique characteristics of the U.S. banking system.

The second proposal would make corresponding changes for other banks, which would better match their risk-based capital requirements to the actual risks of traditional lending. Drawing lessons from the regional banking stress of 2023, the proposal would also require more large banks to reflect the current value of their available-for-sale securities holdings in their capital levels.

And the third proposal would improve how systemic risk for the largest and most complex banks is measured and how the resulting capital surcharge is implemented. This proposal would usefully address unintended outcomes under the current framework and permit banks to grow in line with the U.S. economy without seeing their systemic capital surcharges increase.

I support seeking public comment on all three of these proposals. I look forward to reviewing the comments we receive. Thank you again to the Fed staff for the presentations and the work done to prepare these proposals.